Age discrimination and retirement Q&As

The Equality Act 2010 and the remaining parts of the Employment Equality (Age) Regulations 2006 cover age discrimination, but also aspects of unfair dismissal, redundancy and retirement procedures.

Age discrimination

• Direct, indirect, victimisation and harassment are forms of age discrimination in employment which are prohibited.
• Direct and indirect age discrimination can be justified if the treatment or provision criterion or practice in question is a proportionate means of achieving a legitimate aim. This is unusual and is in contrast to other forms of discrimination where usually only indirect discrimination can be justified
• Recruitment, selection and promotion based on age are unlawful unless this can be objectively justified.
• All employment benefits practices that are based on seniority, length of service or experience are potentially affected. These could become directly or indirectly discriminatory on the grounds of age. For example, additional annual leave for longer serving workers.
• Provision of life assurance cover to retired workers has a special exemption.
• Length of service requirements for employment benefits practices of five years or less may be permissible as these are deemed not to be unlawful age discrimination.
• Length of service requirements for employment benefits practices of periods longer than five years may be permissible if the employer can show that they have awarded the benefit to reward loyalty, to encourage motivation, or to recognise the experience of a worker.
• Employers are no longer expressly liable for harassment of employees by people (third parties) who are not employees of the organisation, such as customers or clients. Although the government repealed the previous specific protection, employers who fail to protect employees from harassment about their age are still likely to face liability for breach of contract or under the normal anti-harassment provisions.
  
• From 1 October 2010 age discrimination has expressly covered:
  • Associative discrimination - which is discrimination against a person because of their association with someone of a certain age, for example the carer of an elderly person
  • Harassment by a third party - employers are now expressly liable for harassment of employees by people (third parties) who are not employees of the organisation, such as customers or clients. (In May 2012 the Government launched a consultation on modifying or repealing this provision.
  • Victimisation - there is no longer a need for employees to use a comparator in any victimisation claim (including age) to measure the treatment of the ‘victim’ with another person who has not made or supported a complaint under the Equality Act 2010.

Compulsory retirement

• Individual employers can operate a compulsory retirement age only if they can objectively justify it. This has given rise to much case law.
• The old unjustified compulsory retirements for those over 65 are no longer possible.

Unfair dismissal and redundancy

• The upper age limit for unfair dismissal and redundancy rights no longer applies.
• Age-related bands for the calculation of statutory redundancy payments are still allowed, but the upper and lower age limits at 65 and 18 years old were removed some time ago.

Guidance

Guidance from the CIPD and the Trades Union Congress (TUC) was published in May 2011. It supports Acas guidance and covers flexible retirements, recruitment, pay, benefits and pensions, redundancy and termination issues. The Equality and Human Rights Commission also has a guide.

Direct discrimination

An employer will directly discriminate where someone is treated less favourably than someone else because of their age, or because of the age of someone they are associated with, and their treatment is not a proportionate means of achieving a legitimate aim.

A suitable comparator enables the employee to compare their treatment with that of someone of a different age but in a similar situation.

For example, if an employee complains that they have not been promoted because they are under the age of 20, the correct comparator would be an employee older than 20 but in the same role as the claimant. (Hypothetical comparators are permitted where a real-life example is not available.)

Justification

It is important to emphasise that the Equality Act 2010 provides that both direct and indirect age discrimination can be justified if the treatment or provision in question is a proportionate means of achieving a legitimate aim. This justification applies only to direct age discrimination and not to direct discrimination on the grounds of other protected characteristics. It means that employers who discriminate on the grounds of age have slightly more opportunities for a defence. In other forms of discrimination usually only indirect discrimination can be justified.

Indirect discrimination 

Indirect discrimination is the application of a provision, criterion or practice which discriminates against a person with a protected characteristic.

An example would be a job advertisement for a cleaner with six years’ experience. This may be indirect discrimination against a young person. It is unlikely that an employer would be able to show this requirement pursued a legitimate aim and that it was proportionate.

Victimisation

The Equality Act makes it clear there is no need to use a comparator to measure the treatment of the ‘victim’ with another person who has not made or supported a complaint under the Act.

Harassment 

In deciding whether conduct has the effect of intimidating the claimant, or creating a hostile and degrading work environment, such as to meet the legal definition of harassment, the perception of the victim and the other circumstances of the case must be taken into account.

The Equality Act 2010 makes it clear that associative harassment is sufficient to establish a claim and that employees can also complain of behaviour they find offensive, even if it is not directed at them. Complainants are therefore protected from harassment because of both perception and association.

Employers may be liable for any act of discrimination by employees in the course of their employment (including harassment), although the employee will also be personally liable. In some limited circumstances, employers may be liable for acts committed by third parties.

Genuine occupational requirements

Employers can use a genuine occupational requirement (GOR) as a defence to direct age discrimination claims if an age-related characteristic is a genuine occupational requirement, and it is proportionate to apply that requirement.

In most cases employers trying to justify acts of direct age discrimination use the ‘objective justification’ defence. There are not many cases which rely on the GOR defence because proving it is harder than proving ‘objective justification.’ However some EU case law suggests that age can be a genuine requirement of some jobs.

Employers could also use GOR as a defence to age discrimination, but it would still be very difficult to justify an age limit. It is easier for employers to continue to use objective justification as the primary defence for direct age discrimination, although that has considerable difficulties too.

• Check all stages of their recruitment process and their equal opportunities policies to ensure that they protect against potential age discrimination as well as gender, race, religion, sexual orientation and disability discrimination etc.
• Train managers to be pro-active in changing the culture of the workplace where ageist comments and assumptions are common.
• Audit any employment benefits practices that are based on seniority, length of service or experience, for example additional annual leave for longer serving workers, redundancy schemes, qualification requirements and compulsory retirement.
• Such practices could be directly or indirectly discriminatory on grounds of age although there are extensive exemptions. Employers should check to make sure these exemptions apply to the practices they have adopted.
• Review long-term disability insurance or permanent health insurance schemes to remove any upper age limits which could be discriminatory on the ground of age.

To comply with the retirement legislation employers should:

• Decide whether to adopt or continue employer-justified retirement ages or to manage without a retirement age and justify retirements on an individual basis.
• If the employer wants an employer-justified retirement age, consider whether this will be objectively justifiable, taking legal advice if necessary and if not, take urgent steps to amend and justify it.
• If the employer wants employer-justified retirement ages it should prepare a careful paper trail showing why their chosen age is objectively justified.
• Consider existing share plans, insurance and pension arrangements to check if they co-ordinate with retirement arrangements.
• Check disciplinary, grievance, dismissal, capability, flexible and part-time working policies as these should all cover issues faced by older employees who continue working.
• Audit equal opportunities policies and other documentation.

Examples are given below of factors which should be present at all stages of the employment process.

Equal opportunities policy

• The policy should begin with a statement setting out the organisation’s policy that no employee or potential employee shall receive less favourable treatment on the grounds of race, colour, religion, nationality, ethnic origin, sexual orientation, gender, age, disability, marital status, part time status etc.
• All employees should be aware that the equal opportunities policy includes being positive about age.
• All existing employment procedures and policies should be regularly reviewed to check for compliance with the current law. 

For example, an equal opportunities policy should ensure that age limits should be retained only if they can be justified in terms of the job to be done.

Recruitment

• People from all age groups should be able to apply for jobs.
• People who select new employees must be trained in equal opportunities.
• New appointees and rejected applicants should be monitored to show that age is never an issue, with records of the number of candidates of different age groups who apply, are short-listed for, interviewed for and appointed to positions.
• Remove ageist language from job and promotion adverts and focus on the needs of the job. For example, to prevent claims many organisations have removed dates of birth and requirements of 'X' years experience from application forms. If date of birth information is needed this can be requested at a later stage once the employee has been offered the position or subsequently. If experience is required, it can be described more specifically, for example, ' This position requires candidates to have experience of managing and monitoring the performance of ten people because...'
• Remove phrases that make assumptions about employees from performance assessments and focus on actual performance.
• Consider whether where the organisation advertises appeals to only one age sector and diversify accordingly the places where adverts are placed.

Promotion, training and development

• The policy on promotion should be honest, non discriminatory and understood by all employees.
• There should be a good spread of ages at all levels of the workforce.
• People of all ages should take up training and development opportunities.
• Review the organisation's literature for age bias.
  

Redundancy

• Redundancy procedures should be based on business needs rather than age.
• Employees and their representatives must be involved in planning for redundancy.
• Age should not be a factor when making decisions about redundancy.
• Enhanced redundancy payments may be made based on age and length of service.

Retirement

• If employers decide to manage without a compulsory retirement age, all references to retirement should be removed across all documentation.
• Retirements with no compulsory age should be carefully justified on a case-by-case basis and co-ordinated with performance management procedures.
• If the employer decides to manage without a retirement age, employees should be offered fair and flexible options for continued working as they get older.
• Employer-justified retirement ages should be objectively justified.
• If employers do rely on a retirement age, the employer's policy with regard to retirement and the procedures to be followed should be co-ordinated across all policies and procedures.
• If the employer decides to adopt an employer-justified retirement age there should be an agreed flexible and fair retirement policy which all workers know about.

The situations giving rise to the most common claims arise from erroneous assumptions about people, based on inappropriate stereotypes.

Employers seeking a fresh, vibrant, dynamic, energetic workforce

A common mistake made by employers is to try to ‘shake up’ the workforce and create a fresh, dynamic team. Trying to achieve this at the recruitment stage or subsequently is a highly risky strategy. It is unlawful to prefer a younger candidate in the belief that they will be ambitious, energetic and dynamic. It is also unlawful to dismiss an older employee because it is assumed that a younger one will appeal more to clients or customers.

Patronising attitudes to younger workers

Using phrases like ‘experienced and mature’ in advertisements could be indirectly discriminatory to younger people. Although an employer can attempt to justify that the discrimination is a proportionate way of pursuing business objectives, this is unlikely to succeed unless it can be shown experience is needed for the role.

Increasing numbers of age discrimination claims are being brought by younger workers. Experiencing discrimination is common for younger age groups, with under-25s being twice as likely to have experienced discrimination compared to other age groups. It is quite common for many workplaces to tolerate an environment where it is acceptable to undermine an employee by reference to their age.

To avoid harassment claims, managers must be seen to suppressing ageist attitudes in the workplace. As with other forms of discrimination, individuals may be personally liable for harassment claims if they adopt conduct which violates another individual’s dignity or creates an intimidating, hostile or offensive working environment.

An employer can only know if its length of service benefits are discriminatory by examining them, firstly by looking at whether the benefit is based on a service requirement of five years or less.

To a certain extent, seniority in service is viewed as a legitimate tool for attracting, retaining and rewarding experienced staff and maintaining work force stability. These benefits should also be considered when planning redundancies.

Benefits based on five years’ service or less

Any benefit based on a length of service requirement of five years or less is exempted from the legislation and is deemed not to be unlawful age discrimination.

Benefits based on more than five years’ service

These are discriminatory if the employer cannot show that the benefit was awarded to:

• reward loyalty, or
• encourage motivation, or
• recognise experience.

Employers are, therefore, able to continue awarding benefits to employees using the criterion of length of service, but where a service-related benefit is awarded on achieving five years’ service or longer, an employer must to demonstrate that the service requirement fulfils a business need.

The burden is on the employer to show that it ‘reasonably appears’ that the service requirement of over five years fulfils a business need of the organisation.

The employer will have to show that it has considered if and how the benefits granted for more than five years' service assists in encouraging loyalty, increasing motivation or rewarding experience, and how a criteria of less than five years’ service would not.

There is a clear intention to allow employers to be able to offer benefits based on length of service and in theory it should not be a difficult test to satisfy. The evidence could include information obtained from monitoring, staff surveys or focus groups.

Some employers offer insurance-based benefits such as life assurance, income protection, private medical cover and permanent health insurance and accident cover. Excluding older workers from such benefits can be complicated.

Older workers can be excluded from some of these benefits as long as the employee has reached the state pension age. However, employers must remember that employees may have a contractual right to such benefits and removal may lead to a breach of contract or constructive unfair dismissal claims.

While, generally speaking, employers must not discriminate between employees on grounds of age, the Equality Act 2010 provides a voluntary exception to the age discrimination provisions to enable employers to stop providing access to any group risk insured benefits to employees when they reach age 65. Employers can therefore exclude older workers from such benefits.

All other employee benefits are not subject to this exemption and should be offered to all employees regardless of age, otherwise a discrimination claim and/or contractual claim may arise.

A unique feature of age discrimination is that an employer can attempt to justify both direct and indirect discrimination claims. (With other forms of discrimination only indirect discrimination claims can be objectively justified.) Justification is an extremely important concept as there is no longer a default retirement age. All retirements must be justified using this principle.

‘Objective justification’ means that an employer can defend an age discrimination claim by showing that the way it treated the employee, or the provision it adopted, was a proportionate means of achieving a legitimate business aim. For example, employers may need to justify a redundancy scheme, qualification requirements or compulsory retirement ages that have a disproportionate impact on one age group.

Whatever measures the employer has taken must therefore:

• correspond to a real business need
• be appropriate and necessary to achieve the objectives pursued, and
• be proportionate.

The best guidance for employers who wish to justify age discrimination, including having a retirement age, comes from case law. There are more cases concerning objective justification than in any other area of age discrimination law.

It is unlawful for employers to specify different contractual pension or retirement ages for men and women.

The key point is that if an employer cannot justify each and every dismissal of an older worker, the dismissals will be unfair and age discriminatory. Therefore employers can adopt a compulsory retirement age, but it will have to be justified.

More information on the state pension age, including a calculator, is available from the Pensions Advisory Service.

An employer who dismisses either:

• a younger worker to avoid paying them increases in the national minimum wage, or
• an older worker who has become too expensive

is likely to have unfairly dismissed that employee and committed age discrimination. In some cases the employee may not have the necessary period of employment to claim unfair dismissal, but there would be a discrimination claim under the Equality Act 2010.

National Minimum Wage and National Living Wage

The Equality Act contains an exemption that means that it is generally not age discrimination to pay a younger worker less than an older worker if the minimum wage rate each worker is entitled to is different.

Age discrimination can still arise in relation to wages in recruitment or redundancy selection. Examples of at risk of age discrimination claims include:

• An employer unable to fund the national living wage (NLW) selects staff over the age of 25 for redundancy. This would be age discrimination. Although direct age discrimination can be justified, it is highly unlikely the courts would accept an attempt to avoid paying the NLW as a defence.
• Similarly, an employer looks to recruit people aged under 25 to avoid paying them the NLW.

Compliance with the NMW and NMW is enforced by HMRC with fines of up to 200% of arrears owed, up to a maximum of £20,000 per each underpaid employee. There are also criminal charges and potential disqualification from being a company director for 15 years.

Employers who wish to initiate the retirement of an employee now have two main options with regards to retirement age. They can either stop using the concept of a fixed retirement altogether and use other reasons for dismissal on a case-by-case basis, or they can adopt an objectively justifiable compulsory retirement age.

Retirement ages are acceptable only to the extent that they can be justified. The employer must be able to show that the age which has been adopted is to pursue a legitimate business aim and that the measure the employer has taken is a proportionate means of achieving that aim.

Whichever strategy they adopt, employers should put in place a clear policy that applies across the workforce, regardless of age.

Current case law provides a number of points for employers to bear in mind.

No, employers should not issue successive fixed-term contracts to try and avoid employment law protection, although this solution has been suggested by some employers. The perceived advantage is that an employee may presume that a fixed-term contract has expired and not query it.

However, such a strategy exposes the employer to the risk of an unfair dismissal claim. If fixed-term employees have their contracts renewed, or are re-engaged on a new fixed-term contract when they already have a period of four or more years of continuous employment, this will create a permanent contract, unless employment ceases.

If the terms and conditions are less favourable, for example, a significant reduction in the hourly rate of pay, then the employee could potentially also bring a claim.

No. The employee must consent, and even asking an employee to undergo a medical exam leaves an employer vulnerable to several types of claim, including age and/or disability discrimination and (possibly) unfair dismissal. The exceptions would be in the types of occupation in which a compulsory medical exam may be objectively justifiable.

There are three main options.

1. Dismiss for incapability

With the abolition of the default retirement age, employers will have to manage old, underperforming or ill employees in exactly the same way as other underperforming employees. The key points to remember are that:

• there must be a fair reason to dismiss
• there must be a fair process
• the Acas code of practice on disciplinary and grievance procedures and the employer’s own procedures must be complied with, and
• the decision to dismiss must be objectively justifiable.

Employees of any age can always be dismissed for poor performance, but the process is not a quick and easy one. In addition to following the normal disciplinary or capability procedure for handling such situations and the Acas code of practice, if health issues are involved then a medical opinion will also be needed. Those employees whose poor performance is the result of ill health may threaten a disability discrimination claim, which may be harder to defend.

Expert legal advice should be taken.

If underperforming older employees are treated differently to younger ones, they will be able to claim age discrimination. Employers must therefore be consistent and keep careful records of the problems, meetings and all stages of the process. If the only issue is the employee’s age and not their performance, then there will be an age discrimination claim.

2. Offer part-time or flexible work options

Part-time or flexible working may help ease employees into retirement.

Workers who already work part-time have a right not to be discriminated against, but there is no statutory right which entitles workers to work part-time. Employers should consider the benefits of retaining the experience of older employees on a part-time basis. Key points to remember are:

• Any variation to an employee’s working arrangements must be by consent and accurately reflected in the employee’s written details of employment.
• Part-time workers must be offered the same terms and conditions as full-time workers, otherwise claims for less favourable treatment under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 may arise. There may also be indirect sex discrimination or other claims under the Equality Act.
• All benefits, including holidays, must be pro-rated.
• All requests to work part-time must be considered seriously (the flexible working request procedure may apply to some such requests, although this is less likely for most older workers).

Initiating discussions

It is difficult for employers to broach the subject of what an employee’s plans actually are. Unless all employees are asked the same question, calling older employees to a meeting to discuss their futures with them is going to be the basis for an age discrimination claim.

Acas recommends setting up regular individual workplace discussions with all employees on their aims and aspirations. This can help employers discuss the employees’ work requirements and may provide the opportunity to raise the issue of their plans, including retirement. For all employees, workplace discussions can involve a discussion around where they see themselves in the next few years. Acas also says it is good practice to hold these discussions at least annually, on an informal and confidential basis, and cover:

• performance to date against targets, activities and outcomes
• future performance
• development or training needs
• plans (employer)
• aims and aspirations (employee).

3. Negotiate a compromise or settlement agreement

Some employers may choose to avoid the whole process of managing an employee out for capability or other reasons. An alternative is to start ‘without prejudice’ negotiations, with a view to concluding a settlement or compromise agreement. This will involve offering a payment to an employee who is reluctant to go. This process will work in just the same way as for any other employee where the employer makes a commercial decision to dismiss without going through a drawn out dismissal process.

Other employers may attempt to compel employees to retire by encouraging them to sign compromise agreements that relinquish their rights to bring unfair dismissal, age and disability discrimination claims (for example). Others may wish to avoid this, as negotiating a compromise agreement with one difficult employee may be perceived as unfair to those who wish to retire quietly.

Setting a precedent for all other employees could prove expensive as age discrimination claims can involve substantial payments. Of course any negotiations must be genuinely without prejudice, and the employee must receive independent legal advice in the usual way.

The Enterprise and Regulatory Reform Act 2013 enables employers to initiate offers or discussions about settlement agreements without those being used as evidence in an unfair dismissal claim. However, this is of no assistance to employers wishing to initiate discussions with older employees, because the conversation could still be referred to if a claim of age discrimination were to arise.

Yes. The request to continue working is a request to continue under the employee's existing terms and conditions. The employer should consider the request but can decline it.

Many employees will request some form of flexible working and it is good practice to try and accommodate such requests. It may be age discrimination to offer flexible working options to one particular age group and not others.

If an employee wishes to retire, they just need to give the normal notice period outlined in their terms and conditions of employment.

An employee’s voluntary retirement is really a resignation like any other. There is no statutory procedure for an employer to follow if the employee wants to retire.

If the employee changes their mind about retiring after giving clear notice of their intention to do so, the employer does not have to accept the employee’s withdrawal of their resignation.

A compromise position for an employee who changes their mind may be some sort of flexible retirement option with reduced hours or altered duties. However there could be a risk of age discrimination if an employer suggests that an employee reduce their hours in preparation for retirement unless the employer can objectively justify imposing such a change.

Age discrimination compensation is uncapped, but levels of compensation vary and depend on the facts of each case and the employee’s salary.

For general guidance on the approach to the calculation of compensation in a discrimination context, see our Tribunal claims, settlement and compromise Q&As.

Reduction in employment tribunal claims

The introduction of fees to issue and hear tribunal claims has lowered the number of claims being brought, as has Acas early conciliation. For more information, see What are the fees and costs which can be payable in the employment tribunal? in our Tribunal claims, settlement and compromise Q&As.

State pension age

The abolition of the DRA is only one measure the government is taking to encourage people to work for longer. The state pension age is also rising. This will increase to 66 in 2020, faster than previously scheduled.

Brexit

For information on what Brexit may mean for employment law, read the blog by our Public Policy Advisor (Employer Relations) and visit our resource hub.